Take in alleged fraud may be $30 million

Dozens might have invested

Wendell Spell is seen here in a 1996 mug shot taken in Chesapeake, Va., where he was convicted of taking money under false pretenses. Spell vanished Oct. 14 after allegedly bilking Hall County investors out of millions.

DOCUMENTS

If Wendell Spell bilked investors out of millions of dollars, he did it in textbook fashion.

According to those who dealt with him, he paid out good returns on what he said was an overseas venture to sell heavy equipment in the Middle East. He relied on word of mouth and let investors do the recruiting for him. And he bolstered his trustworthiness by invoking the word of God.

Now, as the 50-year-old ex-con from Clermont is nowhere to be found, numerous sources who did not want to be quoted say his alleged Ponzi scheme may have taken its victims for $20 million to $30 million.

According to Hall County court records, one investor, Gainesville attorney Mike Weaver, suffered damages of $3.2 million. Another, David Brannon, lost $255,000 investing with Spell’s business, Cornerstone International Investments LLC.

So far Weaver and Brannon are the only victims to file civil suits against Spell. Spell has not been charged with a crime, but authorities are believed to be looking into whether he defrauded 20 or more people in Hall County alone.

Spell, who ran a business on Aviation Boulevard selling bulldozers and other heavy equipment, hasn’t been seen since Oct. 14.

"It seems to me he had an exit strategy," said Gainesville attorney Graham McKinnon, who represents Brannon. "I wouldn’t be surprised if he had been planning that day for months."

The Ponzi scheme usually has a lifespan of about 18 months and is always doomed to collapse, said Robert Townshend, an attorney and expert on such schemes.

When the fraudster becomes unable to pay out returns on investments, "that’s when the excuse-making starts," Townshend said.

"The excuses run from plausible to implausible, sometimes blaming it on a third party," Townshend said. Often the operator of the scheme blames the delays on a foreign government, he said. Spell was said to tell investors he was selling equipment to Dubai and splitting the profits with them.

According to Weaver’s lawsuit, he had a verbal agreement with Spell that also was validated "through the course of conduct of the parties over many transactions."

But Spell, according to the suit, at some point began lying about the location of the equipment.

Weaver did not return phone messages seeking comment.

In Brannon’s lawsuit, Spell is alleged to have convinced multiple people to invest in a piece of equipment, and "each victim believed they were the only investor in that specific piece of equipment."

Spell’s scheme undoubtedly involved using word of mouth about the solid initial payouts to recruit others to invest, Townshend said.

"It’s too hard to go out and sell one investor at a time," Townshend said. "You’ve got to have the investors selling for you."

Spell was described by some as appearing fervently religious. The name of his investment company, Cornerstone, was one indication.

Townshend said that fraudsters presenting themselves as devout is "really very, very common."

"If you want to start (a Ponzi scheme), start with a church," Townshend said. "You get one church elder who everybody believes, and the flock will follow."

‘He had ripped off so many people’

Wendell Spell had a checkered past before he came to Gainesville. In 1997, he was given an eight-year probated sentence for taking money under false pretenses in Chesapeake, Va. In neighboring Virginia Beach, he is accused of bilking about a dozen people out of money before skipping town.

Spell’s father, William Spell, said this week that his son moved to Clermont while working for a company that erected cell phone towers. The company moved from North Carolina to Hall County, then folded. Spell decided to stay put with his wife of 20-plus years, Pamela, and their three children.

"He said he wasn’t going to move again, that he was tired of moving," William Spell said.

When one former investor from Virginia tracked him to Clermont in 2004 after eight years of searching, Spell asked him not to reveal to others where he lived.

Robert Hodges, a small business owner from Virginia Beach, described a scam of a much smaller scale than the latest case.

"He would borrow money from people and tell them he’d pay them back shortly," said Hodges, who loaned Spell $17,000. "He would pay them back, but then it got to the point where he wouldn’t pay anyone."

About 10 others who fell victim to Spell’s ploys hired a lawyer and tried to decide what to do, Hodges said.

"He had ripped off so many people, and we were all telling our stories about what he had done," Hodges said. "We had no idea how big the scheme was."

‘It’s very easy to be taken’

Ponzi schemes like the one Spell is suspected of operating are not uncommon.

This year an Atlanta man was sentenced in connection with a Ponzi scheme that took $29 million from investors.

Travis Correll, 31, was given a 12-year prison sentence in March after pleading guilty in U.S. District Court to operating an investment scam from 2001 to 2005 that offered high-yield returns from foreign banks. Correll allegedly squandered much of the money on gambling trips.

While Correll was ordered to pay restitution, "some of the money he stole is simply gone and will never be recovered," U.S. Attorney David Nahmias said at the time of his sentencing.

Nahmias’ office will likely handle Spell’s case. The U.S. Attorney’s office and FBI have taken the lead in the investigation.

FBI spokesman Steve Emmett said Thursday that there was no active search for Spell’s whereabouts. In many white-collar crime cases, agents wait for an indictment to be obtained before they seek to arrest a defendant, Emmett said.

The U.S. Attorney’s Office is not commenting on the case or when it could be presented to a federal grand jury.

Townshend, who said he once was able to get back $13 million of a bilked investor’s money, said if a suspect is ever arrested on federal warrants in a Ponzi scheme, then civil litigation becomes moot.

"Once the Justice Department gets involved and they get a restitution order, that just wipes out all the lawsuits," he said. "The money that would be paid in any judgment goes back in the pot to be redistributed (to all the victims)."

And while some Ponzi operators have been caught with a substantial amount of money tucked away in overseas accounts, "most (victims) get back about 10 cents on the dollar," Townshend said.

Townshend says Ponzi schemes are so prevalent because they work, even with shrewd investors.

"It’s very easy to be taken, because someone says, ‘We’re going to do this,’ and you get paid right away," Townshend said. "It’s a good deal. The guy says he’s going to pay you, and he pays you like clockwork."

Until he doesn’t anymore.

"He’ll have a sense of when it’s time to get out of there," Townshend said. "It’s when he can’t pay the money that’s due, and people are starting to threaten him."

It is not known whether Wendell Spell was ever threatened, but there’s no doubt he is a fugitive — if not from justice, then from those owed millions.

Hodges said he would like to see Spell behind bars, and he can’t imagine that Spell is enjoying his life on the lam.

"Being on the run like that, that’s no kind of life to live," Hodges said.